The title gets it the wrong way around. What we have here is first a lot of caution, then an explosion of lust. Ang Lee has followed his magnificent version of E Annie Proulx's Brokeback Mountain with another love story - more explicit in many ways, though more complex and oblique - and it's a movie that showcases Lee's flair for period detail and genre stylisation.

For his sheer muscular verve and ambition, Lee deserves a standing ovation. Orson Welles was described once as picking up a play with the confidence of a marksman picking up a rifle, and that is exactly how I felt Lee handles this source material: a short story by Eileen Chang. He has given Tony Leung a chance to shine with one of the most charismatic and memorable performances of his career, and in the twentysomething newcomer Tang Wei, he has made a tremendous discovery. Fiercely intelligent and hauntingly beautiful, she gives a passionate, courageous performance that deserves a shelf-full of awards; it's already made her an Asian movie-star to rival Zhang Ziyi.

Lust, Caution is an erotic espionage drama, a little like Hitchcock's Notorious in its plot, set in Japanese-occupied China in the second world war. Tang Wei plays Wong Chia Chi, an unassuming young college student who in 1939 finds herself left behind in Hong Kong when her father flees to England. But Wong is to find her calling when she is invited to join a theatre troupe performing patriotic plays, the purpose of which is to raise cash for the homeland's defence. Her performances are electrifying, and the collection tins are chinking, but their leader Kuang (Wang Leehom) is impatient with mere play-acting. He wants to use their talents for more direct action: namely, an elaborate sting that will ensnare the hated collaborationist police chief Yee, played by Tony Leung. Wong will seduce him by pretending to be a bored married woman in search of adventure, and once Yee's guard is down, he will be assassinated.

The plan ends in bloody catastrophe, and Yee gets away, reappearing in Shanghai in 1942, where Wong also fetches up and the official resistance contact her with a message: they were impressed with her amateur attempt and the plan is back on. She must begin the seduction anew, but this time both hunter and hunted are older and more careworn; idealism has become clouded with fear and exhaustion, and does each suspect what the other is up to? There is a whiff of sulphur in the air along with the whiff of sex. The conditions are in place for a love affair of intense eroticism, obsession and betrayal.

The sex scenes have a glorious impact, all the more so for the long, burning fuse that precedes their detonation. Wong's sexual pre-history is made up of earlier, tragicomic scenes in which the poor innocent volunteers to be deflowered by a member of her resistance group, so that her virginal state will not give the game away. The spectacle of the young man doing his bit by doggedly thrusting away on top of Wong's tense, miserable body is horribly funny and un-erotic, a mirror image to the deadly serious sizzle of her later, passionate bedroom athletics with Yee. And whatever the ambiguity of her feelings for him, they assume a poignancy and even tragedy when we learn that Wong's emotions could have been engaged elsewhere, far earlier in the story.

Arguably, the sex scenes do not have the subtlety and nuance of Wong and Yee's flirtatious dinner in Hong Kong and the tension of their automobile ride home together, wondering whether or not Wong would be inviting Yee in for coffee. The ferocious, destructive passion, however, confers a retrospective intensity on these moments, and a piquancy too: a sense that in those days their dangerous game had, if hardly innocence exactly, then a more manageable kind of pleasure.

There is tremendous sweep and potency here; the streetscapes in Shanghai are spectacular and it's a wonderfully satisfying experience, though it has to be said that the film does not offer the same unmediated insight into the minds and hearts of its lovers that Brokeback Mountain did. Fundamentally, we all felt that we knew, really knew, what it felt like for the two cowboys to be in love; here the question is a little more difficult. Of course, it is a different sort of film, and this alienation and emotional occlusion is a central part of what Lust, Caution is about. It is another resounding success for Ang Lee, whose film-making has such mass and substance. His movies are like huge, exciting new buildings for us to gather round and wonder at.